I got news from Andrew Hallam’s blog that Vanguard, the US investment company has gain approval to trade a selected group of ETFs in HKSE.
This is big because if you would want to form a portfolio of low-cost index ETF, your best bet is to go for the non profit investment management company that’s objective is to minimize costs and create products that benefit investors.
Vanguard was started in the 1970s by John Bogle, well known for being a fierce advocate of passive index investing.
Last year, we covered over here that Vanguard attracted more money than many of its competitors, meaning more are starting to realize the benefits of passive index investing vesus active investing.
No withholding dividend tax
While investors in Singapore can purchase Vanguard ETFs listed in US stock market, the main peeve are currency fluctuations and a 30% withholding tax on dividends.
The withholding tax means that it is unwise to go for a ETF that distributes large amount of dividends such as preference shares ETF, REIT ETF, Utilities ETF, Dividend Aristocrat ETF or High Yield Emerging Markets ETF
The downside is that we do not know what ETF will be listed, but I guess it is usually the most common ones which are unlikely to be high dividend based ETF.
SGX a possibility
This gives further support for investors locally to see if they will eventually be listed in SGX.
The main problem is that ETF in Singapore are so illiquid and you may pay a spread premium which wouldn’t be very cost efficient.
The justification to list in Singapore increases when you view the country as a country that is a wealth management hub and high net worth individuals.